During the September 11 episode of Mad Money, discussing Adobe Inc. (NASDAQ:ADBE), Jim Cramer said:
I’ll tell you what, it was a true throwback day. Funnily enough, the tech rally had little to do with some things that confused me and a lot to do with positive statements by Adobe and Oracle, even as their stocks themselves weren’t participating that much. Adobe, a fallen angel, represents enterprise software, and Oracle, once a database company and now a data center builder, represents artificial intelligence.
The fact that Adobe showed some growth, any growth, and Oracle was able to raise $20 billion in what’s known as an at-the-market equity offering showed that they can live to play again. Both gave conservative forecasts. That’s okay. Neither of these companies are about to be crushed anytime soon, though. That’s what matters… As I said on the morning show, I thought that Adobe, which was down badly, would actually finish up, and it did, gaining 1.3%. I think Adobe is a candidate for a short squeeze.
Adobe’s AI Business is Growing Rapidly
Adobe Inc. reported fiscal third-quarter revenue of $6.76 billion, up 13% year over year, while non-GAAP diluted EPS rose 15% to $6.13. Total ARR reached $27.50 billion, up 11.2% year over year, while AI-first ending ARR exceeded $650 million and grew more than 150%. CEO Shantanu Narayen said Adobe was “just beginning to capitalize on the massive AI opportunity across creativity, productivity and customer experiences.” He also pointed to the company’s more than 1 billion monthly active users.
The company raised its full-year revenue forecast to $26.576 billion to $26.626 billion, while its fourth-quarter revenue target is $6.80 billion to $6.85 billion. Reuters reported that the midpoint of the quarterly range was slightly below the $6.85 billion analyst expectation.
Bear Case for Adobe
Adobe Inc.’s results also showed weaker recurring-revenue momentum. Remaining performance obligations grew 8% year over year, compared with 13% in the previous quarter. Those figures contrast with AI-first ending ARR, which grew more than 150% year over year, and Adobe’s fiscal 2026 target of 10.2% ending-ARR growth.
Competition from AI-powered design platforms including Figma and Canva adds another pressure point, while Adobe is preparing for a leadership transition, with Anil Chakravarthy set to become CEO on December 1 as Narayen moves to executive chair. The fourth-quarter revenue forecast also came in below the analyst expectation cited by Reuters, despite the company raising its full-year revenue outlook.
Hedge Funds and Short Interest
As per Insider Monkey, which tracks more than 1,000 hedge funds, 81 hedge funds held ADBE at the end of the second quarter, down from 86 in the first quarter. Meanwhile, short interest stood at 4.38% of the public float. Cramer called Adobe Inc. a potential short-squeeze candidate after its latest results. The company reported strong AI-first ARR growth, while RPO growth slowed, leaving both the AI growth and broader recurring-revenue trends in focus.
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